Am I better off sticking with my H2B over LISA?

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hero9989
hero9989 Posts: 13 Forumite
First Anniversary Combo Breaker
in ISAs & tax-free savings
First some facts:
    I currently have 3600 in my H2B account
    I was looking at opening a Cash LISA next month when it becomes available.
    I don't
plan to buy a house in the next 12 months, but it could be any time after that.
    I plan on putting in the maximum possible into whichever ISA account and the rest of whatever I can save into a regular savings account

I worked out that if I
  1. Skip this month's H2B ISA Payment so I haven't paid anything in this financial year
  2. move to a LISA this June, then towards the end of the year (March ish) - transfer my current H2B ISA balance in, and pay the maximum £4000 allowance into the LISA
Next June I will have £7600 in my LISA (worth £9500 towards a house)

If I Carry on paying into my H2B ISA at £200 a month including this month
Next June I will have £6400 in my H2B and £1200 in another savings account (Worth £9200 towards a house)

With the above I know that the LISA will get me an extra £300 if I were to buy my house that same month. The £300 doesn't seem like enough to warrant moving to a LISA especially since it makes it impossible to get the bonus during the first 12 months (never know what could happen and force me to look early)

So my Question is this
Assuming I don't immediately buy a house in June next year; on a monthly basis how would my ISA savings progress in each of the above scenarios?
I think -
The H2B is simple - an extra £200+£50 bonus each month.

The LISA - I'm not too sure. How much can I put in each month and how much can I get out at any point after the bonus becomes payable (month 13 onwards).

Thanks in advance!

Comments

  • eskbanker
    eskbanker Posts: 31,034 Forumite
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    The HTB contribution limit is monthly but the LISA one is annual, so you could pay in up to another £4K (if available) on or after 6 April 2018 which would be increased by 25% within a month, giving you a much better return from the LISA route by June 2018.
  • hero9989
    hero9989 Posts: 13 Forumite
    First Anniversary Combo Breaker
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    eskbanker wrote: »
    The HTB contribution limit is monthly but the LISA one is annual, so you could pay in up to another £4K (if available) on or after 6 April 2018 which would be increased by 25% within a month, giving you a much better return from the LISA route by June 2018.

    Hi, Thanks for your reply! Are you completely sure the bonus is payable straight away after month 13? According to moneysavingexpert.com/savings/lifetime-ISAs
    The bonus is paid every year until you hit age 50.
    It's added to your account annually until April 2018, then monthly.
    I'm not sure if this means you receive the bonus on anything that's in the account (up to £4000) at any month during that year
    Or you receive 1 months worth ( up to £4000/12 months = £333.33) for each month the money is in the account...

    Thanks again :)
  • eskbanker
    eskbanker Posts: 31,034 Forumite
    First Anniversary Name Dropper Photogenic First Post
    edited 18 May 2017 at 11:51AM
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    The bonus is payable on LISA contributions not on balances including interest/growth (the HTB model) and my understanding is that a £4K contribution at the start of the tax year will receive a £1K bonus the following month rather than a twelfth of this every month thereafter - there doesn't seem to be any support for the latter in the documentation which I feel there would be!

    https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/553333/Lifetime_ISA_technical_note_September_2016_update.pdf states:
    The government bonus

    1.17 The government will provide a bonus of 25% on all contributions to a Lifetime ISA within the limits. The bonus will be paid only on the amount paid in, and not on any interest or investment growth. This means that if an individual invests £4,000 in a year, but after investment the pot decreases before the claim is made, they will still be entitled to a bonus of £1,000.

    1.18 The ISA manager will claim the bonus from HMRC and pay this into the individual’s Lifetime ISA. Managers will not be required to hold government bonus payments separate from other Lifetime ISA funds or invest them differently. There will be no statutory minimum size of bonus that a provider can claim.

    1.19 ISA managers will submit any claims for 2017-18 to HMRC after the end of that tax year. From 2018-19 the bonus will be claimed and paid on a monthly basis.

    Edit: the HMRC guidance notes for ISA managers also suggest monthly bonus will be 25% of contributions made in any given claim period (month):
    9B.25 For 2018/19 and each subsequent year the bonus will be claimed by the Lifetime ISA manager on a monthly basis in respect of qualifying additions made during that claim period. Claims must be made by the due date, i.e. within 14 days beginning with the day after the end of the claim period (which will run from 6th of a month to the 5th of the next calendar month).
    The way I read this is that 25% of anything paid in during a claim period (month from 6th to 5th) will be claimed by the ISA manager and paid into the LISA within 14 days. Since contributions could be made at the start or end of the tax year, I don't see how any allocation across multiple months would work and am sure it would be specified here!
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